Pak supports EPZ in occupied Kashmir

Homologation of Actros range of trucks and tractor trailers begins.

An export processing zone (EPZ) will be set up in Pakistan-occupied Kashmir (PoK) for which the Pakistan government has pledged fiscal and legal support and may solicit investments in the future.

The proposed EPZ in Mirpur in PoK is more the result of local demand than the Pakistani government's initiative. The area does not have too many industries and is geographically one of the farthest points in Pakistan from the sea. The Pakistani government is, however, trying to hardsell the disputed territory as an attractive tourist destination.

Parvez Akhtar Sankhla, general manager (investment promotion for EPZs) in Pakistan's commerce ministry told Business Standard that the project, being promoted by the Azad Kashmir (PoK) Chamber of Commerce and Industry, was at a conceptual stage. "We will provide patronage to the project if it materialises," he said.

While PoK officials have in the past made claims that investments of the order of over $20 billion have been arranged, a large part of which is said to be from UK-based non-residents, Sankhla said attracting investments may be tough, given the political situation in the area. "Investments may not go into Kashmir. Businessmen are smart people and for them the political situation is very crucial," he said.

The Pakistan government has left the infrastructure development activities to the promoters. But if the India-Pakistan peace process is successful, Indian companies would be approached to invest in Pakistani EPZs.

"Under the present rules there is no restrictions on investments from India but we are working on a plan to attract investments from India," Sankhla said.

Under the EPZ rules in Pakistan, a tax holiday is not given to EPZ units but they can import raw material and machinery duty-free since the import and exchange controls are not applicable to these units.

Pakistan has seven functional EPZs in Karachi, Risalpur, Sialkot, Saindak, Rekodek, Gujranwala and Duddar. Another 17 including the one in Mirpur in PoK are under the government's consideration for which memorandums of understanding have been signed with respective industry associations.

The Pakistan government has not been too successful in attracting foreign investment in the existing EPZs. For instance, the Karachi EPZ has attracted a total FDI of $200 million since it was set up in 1983.

The new project in Saindak, a mineral-rich belt, has fared marginally better thanks to Chinese companies investing nearly $450 million in a copper unit.

In fact annual exports from the existing EPZs are below $1 billion, with Karachi exports estimated at around $150 million, Sialkot at $400 million, Risalpur ($300 million) and Saindak ($16 million in the first six months of operation). The other EPZs have yet to commence exports.